Asian Stocks Drop After China Manufacturing Gauges Slide

(Corrects index level in third paragraph of story
published yesterday.)

Jan. 2 (Bloomberg) -- Asian stocks dropped, with a regional
benchmark index retreating from a three-week high, after gauges
of manufacturing in China declined, underscoring challenges for
President Xi Jinping as he tries to sustain economic momentum
while rolling out reforms.

Yanzhou Coal Mining Co. sank 6.5 percent in Hong Kong,
pacing declines among Chinese producers of the fuel. Hyundai
Motor Co. and Kia Motors Corp. lost at least 5.1 percent after
South Korea’s largest automakers forecast their weakest sales
growth in eight years. BHP Billiton Ltd., Rio Tinto Group and
Fortescue Metals Group Ltd., Australia’s biggest iron-ore
exporters, gained at least 0.6 percent as shipments from the
world’s No. 1 exporter of the commodity resumed after a cyclone.

The MSCI Asia Pacific excluding Japan Index slipped 0.6
percent to 465.32. Japanese markets are closed for a holiday.
Global equities soared by more than $9 trillion in 2013 as
central-bank stimulus helped the U.S. economy gain momentum and
Europe recover from its longest recession.

“We’re seeing some profit-taking today following the
recent rally,” Teresa Chow, a Hong Kong-based fund manager at
RBC Investment (Asia) Ltd., which oversees $1.5 billion, said by
telephone. “China’s reforms may bring short-term pain for the
economy, but over the longer term we see a more positive
story.”

China Manufacturing

China’s manufacturing purchasing managers’ index came in at
51 for December, the National Bureau of Statistics and the
nation’s logistics federation said yesterday. That trailed the
median economist forecast of 51.2 and was a decline from
November’s 51.4 reading.

A separate manufacturing PMI gauge from HSBC Holdings Plc
and Markit Economics today slipped to 50.5 from 50.8 in
November, in line with the median of 17 estimates compiled by
Bloomberg. Levels above 50 signal expansion.

“There’s a good long-term story for China with better
quality economic growth, but the pains of the reform program are
probably going to hold the markets back for the moment,” Gary
Dugan, who helps oversee about $53.4 billion as the Singapore-based chief investment officer for Asia and the Middle East at
Coutts & Co., the wealth management unit of Royal Bank of
Scotland Group Plc, told Bloomberg TV. “People are looking for
buying opportunities, but they do need a good story.”

Thai Unrest

Thailand’s SET Index dropped 5.2 percent, the most since
September 2011, amid growing political unrest in Southeast
Asia’s second-largest economy. The nation’s Election Commission
plans to meet members of the biggest political parties today to
discuss ways to ease tension before a Feb. 2 vote that’s being
threatened by growing anti-government protests.

The Asia-Pacific excluding Japan measure traded at a price-to-earnings ratio of 13.4 times as of Dec. 31, data compiled by
Bloomberg show. That compares with an earnings multiple of 18 on
the MSCI All-Country World Index, which advanced 20 percent in
2013.

The Standard & Poor’s 500 Index climbed 0.4 percent on Dec.
31 in New York, ending the year at an all-time high. The Dow
Jones Industrial Average gained 0.4 percent to a record.

Chinese coal producers fell after prices for the fuel
dropped by 25 yuan to 40 yuan per metric ton at the nation’s
coal ports on Dec. 30. The decline was earlier than the market
had expected, Standard Chartered Plc analysts led by Yan Chen
wrote in a report that day. Yanzhou Coal sank 6.5 percent to
HK$6.62 in Hong Kong. China Shenhua Energy Co., the nation’s
biggest producer, dropped 2.3 percent to HK$23.90. China Coal
Energy Co. decreased 4.1 percent to HK$4.18.

Hyundai, Kia

Hyundai Motor dropped 5.1 percent to 224,500 won in Seoul,
while its affiliate Kia Motors sank 6.1 percent to 52,700 won.
The South Korean automakers’ combined deliveries will increase 4
percent to 7.86 million vehicles in 2014, Chung Mong Koo,
chairman of both automakers, told employees during a new year
address in Seoul today. That’s the slowest growth since 2006 and
falls short of a projection of 8 million units based on the
average estimate of five analysts surveyed by Bloomberg News.